“On the campaign trail, Trump pledged to put a tariff of between 10 percent and 20 percent on all imports to the United States, along with a 60 percent tariff on Chinese goods and a 25 percent import surcharge on Canadian and Mexican wares — at least, until our neighbors choke off the flow of all migrants and drugs across America’s northern and southern borders.
This protectionist agenda is far more radical than anything Trump attempted during his first term. It threatens to hamper American tech companies by increasing the cost of semiconductors, depress stock valuations by reducing economic growth and fueling a global trade war, and disrupt the US auto industry, whose supply chains were built around the presumption of duty-free trade with Mexico.
Thus, American investors, executives, and entrepreneurs watched Trump’s first day in office with bated breath: Would his inaugural address and initial executive orders prioritize corporate America’s financial interest in relatively free global exchange — or his own ideological fixation on trade deficits?
Trump’s Day 1 actions did not fully clarify his priorities on this front. In his inaugural speech, the president reiterated his broad commitment to protectionism. Meanwhile, his administration prepared to launch federal investigations into America’s trade deficit in general, as well as the trade practices of China, Mexico, and Canada in particular.
Nevertheless, Trump did not actually establish any new tariffs on his first day in office, as his administration’s arch-protectionists had hoped that he would.
Investors interpreted Trump’s caution as a sign that he would be heeding his advisers’ push for a more limited and incremental tariff policy; stocks rose Monday while the US dollar fell (stiff tariffs would increase the value of America’s currency).
Wall Street’s relief may be premature. Trump appears as ideologically perturbed by America’s trade deficit as ever.”
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“Imposing even a 10 percent tariff on all imported goods would not only harm various business interests, but would also likely increase costs for consumers. Thus, such a duty would harm both Trump’s donors and voters.
If Trump’s first term is any guide, his universal tariff would not even redound to the benefit of American manufacturers, who would be vulnerable to higher costs and retaliatory tariffs from foreign nations. Generally speaking, presidents seek to avoid enacting policies that harm the bulk of their coalition, to the benefit of a narrow band of ideologues. And this is what implementing Trump’s grandest visions for trade policy would likely entail.
Second, the imposition of a universal tariff would roil stock markets. During Trump’s first term in office, he monitored the markets’ performance obsessively, tweeting about it incessantly and suggesting that stock values were a barometer of sound policy, warning in 2018, “If Democrats take over Congress, the stock market will plummet.”
Finally, Trump has recently shown some sensitivity to the interests of his newfound friends in tech, even when those interests conflict with the tenets of rightwing nationalism. Over the holidays, Elon Musk feuded with their co-partisans over the desirability of high-skill immigration and the H-1B visa, which help American tech companies to hire foreign talent. Trump ultimately expressed support for Musk’s position.”
“Donald Trump will soon become the second president to serve non-consecutive terms. Naturally, this invites comparison between Trump and the first president to serve non-consecutive terms, Grover Cleveland. In one crucial respect that juxtaposition is both instructive and cruelly ironic.”
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“When tariffs are too high, Cleveland argued, it means that corrupt politicians and businessmen are able to exploit consumers, often imposing severe hardships through price increases. Just as bad, it means that the government is failing to treat all citizens as equal before the law, instead picking winners and losers in the aforementioned “communism of pelf.”
This was the situation that existed in America during and after the Civil War, when politicians imposed weighty tariffs under the pretext of supporting the nation’s burgeoning business community. While American consumers initially accepted the additional taxation as a wartime necessity, the high rates persisted even after the nascent military-industrial complex had been wound down.
The problem was both simple and intractable: There were thousands of manufacturing, industrial, agricultural, and other business interests that profited from high tariffs. Each special interest group disregarded the national welfare to protect themselves, and as a result, the government accumulated massive surpluses—$113 million in 1886–1887 alone.
Despite this growing crisis, initially, Cleveland did not prioritize tariff reform. For the first two-and-a-half years after taking office in 1885, Cleveland concentrated on rooting out government corruption, which had reached such a nadir that in 1873 Mark Twain dubbed the post-Civil War era as a “Gilded Age.” To the extent that Cleveland’s anti-corruption agenda involved vetoing legislation he deemed financially wasteful, he indirectly picked off some of the rotten fruits that grew from the protectionist tree. However, it was not until 1887 that he shifted his attention to a need for sweeping tariff reform. When he did, he transformed the presidency and America in the process.”
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“Cleveland’s tariff reform proposals passed the Democrat-controlled House of Representatives but failed in the Republican-controlled Senate. Even worse, despite winning the popular vote, Cleveland lost the 1888 election to Republican nominee Benjamin Harrison amid Electoral College disputes in the key states of New York and Indiana. (Unlike Trump, Cleveland accepted his defeat with grace and peacefully ended his term in 1889.) The Republicans took office and passed a high tariff law (framed by future president William McKinley, then an Ohio congressman). The McKinley tariffs raised the average duty on imports by almost 50 percent, and as Dartmouth University economist Douglas Irwin demonstrated in 1998, these tariffs did little to stimulate the economy even as they imposed considerable suffering on low-income Americans.
This is why, just like Trump, Cleveland was able to comfortably get elected to a non-consecutive term by promising to lower prices. The key difference is that, unlike Trump, Cleveland proposed an intelligent solution to the problem—lowering tariffs, not raising them.
Unfortunately for both Cleveland and the Americans of his time, he would not live to see his vision for tariff reform realized. America plunged into an economic depression shortly after he took office in 1893, compelling Cleveland to confront a number of unrelated crises before he could get to tariff reform. By the time a tariff bill did reach his desk in 1894, special interest groups in both parties had diluted it almost to meaninglessness.”
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“Tariff reform along the lines Cleveland advocated would not become the law of the land until the Underwood-Simmons Act of 1913, which was promoted with far more political effectiveness by Woodrow Wilson, the first Democratic president to serve after Cleveland’s administration. By then, Cleveland had been dead for five years.”
“Trump’s position on tariffs begins with his longstanding misconceptions about international trade, which he erroneously views as a zero-sum game with rules that are rigged against the United States. “We’re subsidizing Canada to the tune [of] over $100 billion a year,” he told Kristen Welker on Meet the Press. “We’re subsidizing Mexico for almost $300 billion.”
Trump was referring to U.S. trade deficits with those countries, which are about half as big as he claimed. Those gaps between exports and imports are not subsidies; they reflect goods that Americans voluntarily purchase, which means they get something of value in exchange for their money.
As Trump sees it, however, trade deficits are inherently bad, and he aims to eliminate them by imposing tariffs. Although that is feasible only if tariffs raise the cost of imports, making them less competitive with domestically produced alternatives, Trump contradicts that logic by insisting that tariffs do not raise prices.
“Americans are not paying for the Tariffs” on Chinese goods, Trump averred in 2019. “They are being paid for compliments of China.”
Trump, the self-described “Tariff Man,” clearly does not understand how tariffs work. They are taxes collected from importers, not from the exporting country.
In theory, exporters could respond by cutting prices, or importers could swallow the additional cost. But study after study has found that the cost of tariffs is paid mainly by American buyers of intermediate goods and finished products.”
“the U.K. became the first new member to join the tongue-twisting Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) since it was formed in 2018.
It’s also the first country that doesn’t at least have a coast fronting the region.”
“American consumers and businesses bore roughly 93 percent of the cost of Trump’s tariffs, according to one analysis by Moody’s. The U.S. Trade Commission concluded in 2023 that American companies and consumers “bore nearly the full cost” of the tariffs Trump levied on steel, aluminum, and many goods imported from China.”
“In a rare instance of agreement, Republicans and Democrats have converged on the idea that “Buy American” provisions should be expanded in order to increase American jobs. But a new paper finds that existing federal rules impose high costs on consumers.
A September 2024 working paper published by the National Bureau for Economic Research (NBER) found the Buy American Act has created more than 50,000 jobs. Just one catch: Each one of those jobs costs the economy more than $100,000.”
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“The economists say “they find scant evidence of the use of Buy American rules as an effective industrial policy.” The BAA does not promote economic growth; it’s a costly “employment measure” that benefits a few by robbing all.”
“”The China tariffs are, in my view, a significant piece of leverage—and a trade negotiator never walks away from leverage,” U.S. Trade Representative Katherine Tai said at that time. The Biden administration, she added, was seeking to turn that “leverage into a strategic program that will strengthen American competitiveness and defend our interests in a global economy in which China will continue to play.”
More than two years later, and nearly four years after Biden took office, what has that supposed leverage accomplished? Tai provided the answer to that question this week during an interview with Bloomberg.
“We really haven’t seen the [People’s Republic of China] make any changes to its fundamental systemic structural policies that would make sense for us to provide any relaxation,” Tai told reporter Eric Martin for his Supply Lines newsletter.
In fact, Tai noted that there aren’t any ongoing negotiations between the U.S. and China right now—but don’t worry, she’s still insistent that the tariffs are useful for…something. “At the moment we are not negotiating anything with the PRC on trade,” she told Martin, “but one day we may be back at the table, in which case these tariffs will be useful as leverage, right?”
In summary, Tai’s position seems to be that American businesses and families must continue bearing the cost of the Trump-Biden tariffs even though those tariffs have plainly failed to achieve their primary policy goal (changing China’s behavior) because there’s a chance that someday, somehow, that might make a difference.”
“China, which views democratically governed Taiwan as its own territory, detests Lai as a “separatist”. Lai and his government reject Beijing’s sovereignty claims, saying only Taiwan’s people can decide their future.
On Thursday at his keynote national day speech, Lai said the People’s Republic of China had no right to represent Taiwan, but that the island was willing to work with Beijing to combat challenges like climate change, striking both a firm and conciliatory tone, drawing anger from China.
The Saturday announcement from China’s commerce ministry could portend tariffs or other forms of economic pressure against the island in the near future.
China’s Taiwan Affairs Office, which on Thursday said that Lai’s speech promoted “separatist ideas” and incited confrontation, responded to the announcement by saying the fundamental reason behind the trade dispute was the “DPP authorities’ stubborn adherence to the stance of ‘Taiwan independence'”.
“The political basis makes it difficult for cross-Strait trade disputes to be resolved through negotiation,” it added.
In May, China reinstated tariffs on 134 items it imports from Taiwan, after Beijing’s finance ministry said it would suspend concessions on the items under a trade deal because Taiwan had not reciprocated.
The Cross-Strait Economic Cooperation Framework Agreement (ECFA) between China and Taiwan was initially signed in 2010 and Taiwanese officials had previously told Reuters that China was likely to pressure Lai by ending some of the preferential trading terms within it.”
Sanctions against Russia made their ability to wage war weaker than it otherwise would have been, but only had limited effectiveness due to poor execution and other powers not going along.
“Ukraine has said it will not extend the transit agreement with Russian state-owned Gazprom in order to deprive Russia of profits that Kyiv says help to finance the war against it.
Moscow’s suspension of gas for Austria, the main receiver of gas via Ukraine, means Russia will now only supply significant gas volumes to Hungary and Slovakia, in Hungary’s case via a pipeline running mostly through Turkey. In contrast, Russia met 40% of the European Union’s gas needs before Moscow’s 2022 invasion of Ukraine.”